Saudi Arabia quietly plans to increase oil output by 500,000 barrels per day

Saudi Arabia could increase oil production by 500,000 to compensate for U.S. sanctions on Iran, analysts say. But the kingdom has kept quiet about its plans. STR/EPA

Sept. 28 (UPI) -- Saudi Arabia is poised to steadily increase production to compensate for the Iranian oil that will be subject to U.S. sanctions starting Nov. 5.

Saudi Arabia hasn't said anything publicly, and seemed to tow the OPEC line following Sunday's meeting with other major oil producers. But Commerzbank said Friday that Saudi Arabia could pump another 500,000 barrels of crude oil per day.

"Saudi Arabia apparently plans to quietly increase the oil supply in the short term to compensate for the shortfall in Iranian oil," analysts from Commerzbank said Friday.

President Donald Trump has been at odds with the Organization of the Petroleum Exporting Countries since he tweeted last week demanding increases in production to lower prices. It's turned into a game of chicken between the two.

"The market and certainly the U.S. president is saying to OPEC and Saudi Arabia: 'Show me the barrels,'" said Herman Wang, OPEC specialist at S&P Global Platts. "And Saudi Arabia and OPEC have kind of turned around and said: 'Well, show me the demand.'"

At the same time, Trump's sanctions are designed to prevent Iran from exporting oil. The sanctions, which will take about 1.7 million barrels per day out of the world market, are meant to punish the Iranian regime and pressure the leaders into a nuclear agreement.

An increase in production by Saudi Arabia could escalate tensions between Iran and the kingdom.